Financial Report 



Rick Johnson, Chief Financial Officer 



The Smithsonian Institution receives funding from both 

 federal appropriations and nonappropriated trust sources. 

 Nonappropriated trust funds include all funds received from 

 sources other than direct federal appropriations. These other 

 sources include gifts and grants from individuals, corpora- 

 tions, and foundations; grants and contracts from federal, 

 state, or local government agencies; earnings from short- and 

 long-term investments; revenue from membership programs; 

 and revenue from business activities, such as Smithsonian 

 magazine, museum shops and restaurants, mail order cata- 

 logues, and licensed products. 



Federal appropriations provide funding for the Institu- 

 tion's core functions: caring for and conserving the national 

 collections, sustaining basic research on the collections and 

 in selected areas of traditional and unique strength, and edu- 

 cating the public about the collections and research findings 

 through exhibitions and other public programs. Federal 

 appropriations also fund most activities associated with 

 maintaining and securing the facilities and with various 

 administrative and support services. 



Smithsonian trust funds allow the Institution to under- 

 take new ventures and enrich existing programs in ways that 

 would not otherwise be possible. These funds provide the 

 critical margin of excellence for innovative research, building 

 and strengthening the national collections, constructing and 

 presenting effective and up-to-date exhibitions, and reaching 

 out to new and underrepresented audiences. In recent years, 

 the Smithsonian has also begun to rely on trust funds to sup- 

 port major new construction projects. 



The following sections describe the external environmen- 

 tal factors affecting the Institution's general financial 

 condition, its financial status, and its planned response to 

 changing conditions; financial results for fiscal year 1999; 

 and organizational and financial measures being taken to en- 

 sure the continued fiscal health of the Institution. 



Financial Perspectives 



As we move into the new millennium, the Smithsonian has 

 made major advances in several key projects that will sustain 

 and enhance its reputation as a world-class center for re- 

 search and educarion. The Smithsonian's continued focus on 

 generating new revenues through fund-raising and business 

 activities is integral to this advancement. 



The Discovery Center in the National Museum of Natural 

 History opened in fiscal year 1999. This project provides 

 space for new programs, a cafe, an IMAX® theater, and an 

 expanded museum shop. Incremental net income from busi- 

 ness activities in the museum will repay the funds borrowed 

 to build this facility. 



The fund-raising campaign for the Dulles Center, a major 

 extension of the National Air and Space Museum at Dulles 

 International Airport, continued this year. By the end of cal- 

 endar year 1999, approximately 68 percent of the campaign 

 goal of Si 30 million had been received in cash and pledges. 

 The capstone of the campaign was a $60 million pledge 

 from Steven F. Udvar-Hazy. Net income from business activ- 

 ities in this facility and pledge payments will repay planned 

 borrowing. The project is also receiving significant support 

 from the Commonwealth of Virginia, which includes provid- 

 ing the basic infrastructure for roads, landscaping, and 

 parking. 



The Smirhsonian has entered into an agreement to purchase 

 the Victor Building, an office building near the Old Patent 

 Office Building, which houses the National Portrait Gallery, 

 the National Museum of American Art, and the Archives of 

 American Art. The purpose of the acquisition is to move ad- 

 ministrative offices currently in leased space, reclaim gallery 

 space in the Patent Office Building by relocaring administra- 

 tive and support functions, and provide additional program 

 space. Fund-raising and savings from amounrs currently bud- 



